NACA responds to Gilbert column on ANCs

July 8, 2011by Jim Gray

To the Editor:

I am writing in response to the recent opinion article “8(a) Contracts Seem to Use Natives to Benefit Non-Natives” by freelance journalist, Matt Gilbert, published on June 28, 2011 on Indian Country Today Media Network. The Native American Contractors Association (NACA) disagrees with Mr. Gilbert’s premise that the Native 8(a) Program is not benefitting Native communities.

Mr. Gilbert‘s article relies on a recent Washington Post series on Alaska Native Corporations (ANCs) that misinformed the public regarding the role, function, value and purpose of ANCs. NACA conducted a thorough analysis of the series, identifying, in detail, the reporter’s inaccurate and misrepresented the portrayal of ANCs. It may be viewed here: http://www.nativecontractors.org/pages/media/wapo-response.php

In his essay, Mr. Gilbert stated:

10% of 35,000 Alaska Native Corporation jobs worldwide are filled by Alaska Natives that’s 3500 out of 35,000 worldwide. Washington DC is 3000 miles away from Alaska, yet most of the Alaska Native Corporation contract work is concentrated there.

For perspective, most Native 8(a) work is conducted outside of Alaska, as that is where the vast majority of federal contracts are located. The fact is, Alaska is not large enough to provide many contracting opportunities. Those who challenge the right of ANCs to operate outside Alaska apply a double standard; restricting Native Enterprises to a geographic boundary makes Native self-sufficiency exceedingly difficult and violates the basic economic tenets that make the United States thrive. In addition, each ANC has a shareholder hire preference policy and diligently works to provide employment for shareholders whenever possible. It’s important to note too that many shareholders choose not to leave their village or the State of Alaska and prefer to live a traditional Alaska Native subsistence lifestyle.

Alaska Native Corporations have to hire a skilled workforce to manage their contracts. Today, there are more Alaska Native CEOs than ever before. And with continued access to substantive 8(a) contracts, more Alaska Native people will have training and educational opportunities that will prepare them with the skills necessary to gain employment with their ANCs and succeed in the business world.

According to the Alaska Native Corporation Economic Data 2010 report:• The 12 regional ANCs hire 3,577 Alaska Natives• In 2008, the 12 regional ANCs provided 13,848 jobs in Alaska• $774 million in payroll was paid in 2008 at an average of nearly $56,000 per employee

Mr. Gilbert continued:

Since 2000, the government has awarded $29 billion to Alaska Native Corporations. According to Senator McCaskill and the O’Harrow article, Alaska Native Corporation leaders collect less than 5% of it. Who gets all the money? The O’Harrow article states: the non-Native management firm president collects $6.4 million off the top (just to create jobs out of the 8(a) money), the non-Native chief finance officer gets $1 million, the non-Native executive vice president $470,000.00, non-Native chief operating officer $402,000.00, and the Native corporation presidents get the crumbs off the table at $219,000.00. The Native shareholder gets $305.00—that’s not even crumbs off the table, that’s licking the cans after the big dinner.

The calculation that Mr. Gilbert refers to is inaccurate. The calculation that Senator McCaskill used was performed by the Majority staff for the Subcommittee on Contracting Oversight in 2009. Calculating the exact benefits to shareholders is much more complex than dividing $720 million by 130,000 to reach $615 per person a year. The calculation does not account for:

• Stock dilution through shareholder growth• Double-counting of shareholders• Not all Alaska Natives are shareholders in an ANC• Benefits by ANCs not included in the 19 that provided self-reported data• Number of shareholders in ANCs not engaged in 8(a) contracting• Benefits provided to shareholders through: jobs, training, scholarships, internships, language preservation, culture camps, elder benefits, health and social services• The huge difference in what profits are and what revenues are

For example, in 2008, ANCSA charitable contributions amounted to $24.3 million, more than nine percent of net profits. From 2005 to 2008, the 12 regional corporations made $70.5 million in charitable contributions to a wide variety of non-profits and community organizations like the Alaska Native Heritage Center, the Alaska Native Justice Center, and Koahnic Broadcast Corporation.

Mr. Gilbert used Sen. McCaskill’s testimony to further his opinions:

Senator McCaskill says, ‘Alaska Natives are being used!’ I don’t think they understand that what really happens here is some corporation decides they want to do business with the Department of Defense, and they don’t want to have to compete for it. They go find an Alaska Native Corporation to pay a few bucks to front for them, which is perfectly legal, and they get this huge contract and they just give a few dollars to the ANCs on the side. They hire no Alaskans. They build no job capacity in Alaska.”

This is false and grossly misrepresents the way in which ANC contracts are awarded. Mr. Gilbert fails to understand that Native corporations are no different from other contractors in their ability to hire subcontractors to responsibly meet the needs of each federal award. This is a common practice among all federal contractors. Mr. Gilbert also overlooks the fact that on federal service contracts, ANCs are required to perform at least 51 percent of each award. In many cases, ANCs perform far in excess of this baseline threshold.

Mr. Gilbert critiqued Sarah Lukin’s comments on generational poverty:

In Lukin’s AFN Speech, she said she was “a child who suffered the pain and humiliation of poverty.” Well, I was too, and still am suffering it. 8(a) contract jobs are not taking me out of ‘poverty’. Tens of thousands of Alaska Natives and elders continue living in extreme poverty. I don’t see 8(a) contracting making any kind of dent on these intolerable issues. I see things getting worse.

ANCs are restricted from using their profits in a way that would benefit only a single class of shareholders, they cannot, for example, use their profits to install water infrastructure in a village or build new homes for people in the village. Thus, ANCs are specifically prohibited by federal law from providing the same sort of governmental services and functions that tribal governments in the lower 48 tribes provide for their members. ANCs must instead focus on providing benefits to their individual shareholder members equitably and proportionately which they do in a number of ways including:

• Managing their remaining lands (lands the ANC own and which have great importance in Native culture)• Providing supplementary income to help augment a subsistence-based living• Coordinating economic development opportunities to provide jobs and resources• Providing scholarships for college and vocational training• Culture and language preservation programs• Donations to local non-profits that deal with a wide range of social services and educational and cultural issues affecting the region or village.

Mr. Gilbert continued:

Senator McCaskell [sic] says that the taxpayers are being cheated. The American taxpayers are not being cheated. The 8(a)’s are providing lots of jobs in Alaska and Virginia, but to Non-Natives, not Natives.

Again, the 12 regional ANCs currently employ 3,577 Alaska Natives. ANCs are stimulating the Alaskan economy and providing jobs to their shareholders. ANCs have a responsibility to hire the most talented executives available to lead the corporations and make them successful. The goal of many ANCs is to one day have a senior management team comprised completely of Alaska Native shareholders. This will happen, provided ANC participation in the 8(a) program continues to offer meaningful opportunities for shareholders who can become future leaders of their respective corporations.

In Mr. Gilbert’s alternative solutions for the 8(a) program he stated:

8(a) contracts should be awarded and evaluated based on how much it builds a village economy and the accountability of Alaska Native College graduates in nation-building for rural Alaska. There needs to be more regulatory oversight and stiffer penalties for ANCs who are not meeting their ANCSA designated responsibility for social and cultural development of their shareholders.

ANCs are having a profound effect on the Alaska Native population. Since their formation, the Alaska Native high school graduation rate has tripled, inflation‐adjusted household income has risen by 50 percent and the proportion of Alaska Native people living below the poverty line decreased by roughly 50 percent. Regarding education, in 2008 alone, contributions of $11.1 million were made to more than 3,200 scholarship recipients as well as endowments.

Again, ANCs are specifically prohibited by federal law from providing the same sort of governmental services and functions that tribal governments in the lower 48 tribes provide their members.

Mr. Gilbert discouraged more 8(a) development by declaring:

I want accountability to villagers. ANCs can look into financing and managing social entrepreneurship, microfinancing, and renewable energy development—Alaska can change the world with rural sustainable communities, but first it has to move past 8(a) contracts.

ANCs are being held accountable. All ANC shareholders have access to the financial records of their respective corporations. If shareholders feel their ANC is not serving the best interests of the community, they have the power to elect new board members to change the makeup of their senior management team and chart a new course for the enterprise.

Native 8(a) contracting is a transformational opportunity for many ANCs and their shareholders. 8(a) profits have significantly improved the lives of shareholders by providing educational opportunities, dividends, insurance, death benefits, culture camps, elder benefits, small business grants, and subsistence programs.

Native 8(a) is a hand up, not a hand out. This non-appropriated opportunity fulfills the Federal government’s unique obligations to Native Americans by enabling the return of profits to the Native communities they serve. Economic development is difficult, if not impossible in many Native communities due to the location and the difficulties in building viable businesses on a reservation, rural Alaska Native village, or Hawaiian Homeland. Native 8(a) is for Tribes, ANCs, and Native Hawaiian Organizations, and they are working hard to create economic self-sufficiency for their respective communities. We cannot afford to limit these enterprises from advancing this worthwhile mission.